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Take a P.I.L.L. Before Buying an Annuity

Stan The Annuity Man

Question: What should I expect an annuity to do?  Why should I consider buying one?  Fred from California

Answer: Let me start by annoying the “annuity sales gods” by saying that you might not need an annuity.  Gasp!  That’s right, annuities are not for everyone even though a lot of agents have a “one size fits all” mentality when it comes to selling them.

I have come up with an easy acronym to use to determine if an annuity might be a suitable and appropriate addition to your specific portfolio needs.  That easy to remember word is P.I.L.L.

   P – stands for Principal Protection

   I – stands for Income for Life

   L – stands for Legacy

   L – stands for Long Term Care

Annuities are transfer of risk strategies that solve for a specific problem.  For example, you can receive income for life from an insurance company regardless of how long you live by “transferring the risk” to the insurance company to provide that income stream.  The same type of risk transfer can be applied to principal protection, providing a legacy for your family, or having coverage for long term care.

Notice that the letter “G” (which stands for growth) is NOT listed.  I know that a lot of agents look at annuities as growth products, but I only feel that one type of annuity can be placed into the growth category.  That one annuity type is a No Load Variable Annuity.  The key word here is no load, which means 100% liquid with no surrender charges. No Load Variable Annuities are the best way to achieve tax deferred growth, are not sold by agents, and have to be purchased directly from the carrier.

All other annuities, in my opinion, should only be considered and owned for their contractual guarantees.  An easy way to remember this is with the following phrase….”you should always own an annuity for what it WILL DO (i.e. contractual guarantees), not what it MIGHT DO (hypothetical or projected returns).”  Agents love to show you past performance or project return scenarios in an effort to sell you the dream.  Bring them back to “Realityville” and always ask to see “0” returns for the life of the annuity policy, so you can make your decision solely on the contractual guarantees.

That’s where the acronym P.I.L.L. comes in handy because it answers the question: “Do I need an annuity?”  If you need principal protection, income for life, legacy, or long term care….then the answer might be yes.  If you need to solve for any of those things, then you should at least explore the contractually guaranteed transfer of risk solution that an annuity can provide.

So what you really need to ask yourself Fred is “what do you want the money to do?”  “What do you want the money to contractually solve for?”  If one of those answers involves the P.I.L.L., then maybe an annuity might be right for your situation.  If not, then don’t let some agent or advisor force you into an annuity product that you might not need.

*If you have a question for Stan The Annuity Man, please send your question to  He will answer all questions directly, and might include yours in his next Annuity123 “Ask Stan The Annuity Man” blog.

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About the Author:

Stan The Annuity Man is a nationally recognized annuity expert and annuity critic, and has been called the national consumer advocate for annuities… and a walking middle finger of annuity truth.  He is a weekly RetireMentor columnist for The Wall Street Journal’s, and is the exclusive annuity contributor for  His highly acclaimed book, The Annuity Stanifesto, is a top seller in its category, and is known as the go to resource for all things annuity.

Stan The Annuity Man has clients nationwide, and is considered one of the top independent annuity agents in the country.  You can learn more at


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